I’m looking to purchase a home in the Rochester area and the seller has offered to finance the home as a contract for deed. I’ve never purchased a home with the seller financing before. Can someone please give me the pros and cons of purchasing a home with a CFD?
Typically you will pay a higher price for the home and interest rate. If you can get a loan you would be better off. You can pm if you want.
1. Title does not pass until the contract is paid off. If the owner has or gets any leins on themself, the property may become involved and only has to be satisfied when the title passes to you. Suggest that you have the seller continue the title before you do the deal and that you have a title opinion done prior to the contract origination sale date. Do it again before final payment is paid. (I had a property deal in which the owner had a government tax lein on himself…it took him 4 years to get straight with the gov. I backed out).
2. I believe that if you miss a payment the property goes back to the seller and you loose any money that you have paid into the property.
3. Get competent legal advice before you purchase any property.
4. Have the property appraised. Chances are that it might not appraise….otherwise it would be bank financible.
5. Have the property inspected for defects or shortcomnigs.
You are the buyer and must be satisfied…especially in this market.
jim
Make sure you set it up using a bank escrow account where the a fully executed deed from seller(not recorded yet) is placed into the account, and you send your payments to the bank escrow. That way if something happens to the seller, the contract survives and you can complete the deal. The bank will disburse your payment, such as paying the mortgage if one exists. Sometimes sellers get into financial trouble and use the money and not make the mortgage payments and the property get foreclosed unknown to you until you make the last payment and find out seller no longer owns the property! There are other fact situations where the using escrow is good idea.
Got to think this deal is a lemon. Only benefits seller…I’d pass.
I have owned real estate if buyers ask about owner finance I want 50% down rest in 5 years. Late lost or short payments it comes back.
Counter with rent to own if you got to have the place….
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Make sure you set it up using a bank escrow account where the a fully executed deed from seller(not recorded yet) is placed into the account, and you send your payments to the bank escrow. That way if something happens to the seller, the contract survives and you can complete the deal. The bank will disburse your payment, such as paying the mortgage if one exists. Sometimes sellers get into financial trouble and use the money and not make the mortgage payments and the property get foreclosed unknown to you until you make the last payment and find out seller no longer owns the property! There are other fact situations where the using escrow is good idea.
What are you talking about?
If this property is being sold on a Contract for Deed – it should be owned by the seller.
If the property has any existing liens on it (i.e mortgage) – it should not be sold via Contract for Deed.
Dog 
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I’m looking to purchase a home in the Rochester area and the seller has offered to finance the home as a contract for deed. I’ve never purchased a home with the seller financing before. Can someone please give me the pros and cons of purchasing a home with a CFD?
I am in the property space and have been for 20+ years. Buying, selling, renting, leasing, etc. Today’s market is a buyers market for “qualified buyers”.
If you have some credit problems – a contract for deed may be a good option.
The sellers may be in a unique situation where –
1.) They don’t need to sell the property – as they own it outright. May have been inherited via a death in the family and they are looking to create an income stream from it.
2.) They may want to help a buyer get into the property with little or no money down.
3.) They may not know what they are doing…..this is always an option.
4.) They may know exactly what they are doing and the house will not qualify for conventional financing due to price asked or other issue.
Conventional Financing.
Mortgage rates are less than 5% for 30 year fixed mortgages,
The Bank will ask you to put 20% down and the property will have to appraise at the value you are buying it for – else you or the seller will have to make up the difference with lower price or more cash from you.
If you are having a hard time qualifying for a mortgage or your like the terms from the seller – might be a good way to go Contract for Deed. I have bought and sold property using this type of financing and there is nothing wrong with it. It has worked in the past and will always be an option for property owners to help facilitate the sale. It is not good or bad – it is just another option.
Just weigh the Contract for Deed Terms with what is available –
If you like the house – they would love to have you buy it from them, at their price and not have to offer you a Contract for Deed. Go get a conventional loan if you can – the house may not appraise for what they are asking…they may already know that.
Also, you could explore Rent to Own – as suggested.
Miss a payment – they can kick you out – just like a bank. There is no free lunch.
Good advise to consult a lawyer to help craft the documents and make sure the closing is properly done and the deed is recorded.
2 cents.
Dog
Thanks guys for all the information on CFD pros and cons it was a big help. We have decided that a conventional 15 year loan will give us the best interest rate and is the best way to finance our new home. 
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